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Cardozo Journal of Conflict Resolution

Abstract

The Note examines the constitutional and practical consequences of Jarkesy, which held that defendants facing SEC civil penalties for securities fraud are entitled to a jury trial under the Seventh Amendment. It considers the limitations of both administrative proceedings and federal court litigation, including concerns about agency bias, restricted discovery, procedural disadvantages for respondents, litigation costs, and delays. Against this background, the Note proposes that FINRA, or another comparable arbitral body, expand its services to offer voluntary arbitration of SEC enforcement actions. Drawing on arbitration’s potential advantages—including speed, lower overall costs, specialized expertise, procedural flexibility, and greater perceived impartiality—the Note argues that arbitration could preserve many of the efficiencies associated with administrative adjudication while avoiding the constitutional concerns raised in Jarkesy. It maintains that voluntary arbitration should not implicate the same Seventh Amendment concerns where both the agency and the defendant consent to the process. The Note further recommends that the CFTC offer defendants a similar option, even though the agency does not face the same immediate constitutional constraints. By providing an alternative to federal court litigation, arbitration could conserve agency resources, support additional enforcement activity, and promote public confidence in financial regulation. Ultimately, the Note argues that voluntary arbitration offers a practical framework for resolving regulatory enforcement actions more efficiently while drawing on the expertise of specialized decision-makers.

Keywords

Securities Regulation, SEC v. Jarkesy, Administrative Law Judges, Arbitration, Voluntary Arbitration, Financial Regulation, Securities Enforcement, FINRA, Commodity Futures Trading Commission, Seventh Amendment, Federal Arbitration Act, Alternative Dispute Resolution, Regulatory Enforcement

Disciplines

Dispute Resolution and Arbitration | Law

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